Singapore Girl Makes Bond Comeback as City Booms: Asean Credit

A Singapore Airlines Ltd. flight attendant opens a window shade in the luxury class suite of an Airbus A380 aircraft. Singapore Airlines, founded in 1972, has a route network spanning six continents, according to its website. Photographer: Carla Gottgens/Bloomberg

A pickup in manufacturing and growth of 3.8 percent this
year, faster than Hong Kong, South Korea and Thailand, is giving
companies the confidence to expand and take on more debt. Las
Vegas Sands Corp. Chairman Sheldon Adelson wants more land for
his casino resort, while Mohamed Mustafa & Samsudin Co.,
operator of a 24-hour department store in Singapore’s Little
India, sold a debut note in the island’s currency.

“Optimism in Singapore as a whole is giving borrowers the
confidence to sell bonds,” said Clifford Lee, the Singapore-based head of fixed income at DBS Group Holdings Ltd., the top
arranger of Singapore-dollar notes for the last five years
running. “The country has always had a resilient, open and
stable market but what distracted companies previously was the
attraction of dollar bonds.”

Borrowing Costs

Offerings in Singapore dollars fell 36 percent to S$19.8
billion last year from 2012 while U.S. dollar issuance in Asia
outside Japan touched a record $126.6 billion. Local-currency
yields in the Lion City average 2.52 percent after spiking to
2.75 percent in September, the highest since November 2008, as
fears Federal Reserve tapering may limit the appeal of regional
Asian economies infected markets.

Notes in the city-state’s currency have returned 1.11
percent this year compared with 1.04 percent for local-currency
bonds in Malaysia, 1.89 percent for baht notes in Thailand and a
loss of 1.03 percent for securities in the Philippines, HSBC
Holdings Plc indexes show. The Singapore dollar has gained 0.13
percent this year, even as the Chinese yuan slumped 2.6 percent.

Singapore Girl

Singapore Airlines, founded in 1972, has a route network
spanning six continents, according to its website. It was the
first airline to offer free headsets and drinks in economy class
in the 1970s and the first to fly an Airbus A380, from Singapore
to Sydney, in October 2007.

It sold bonds this week “while the interest rate
environment is relatively favorable,” according to spokesman
Nicholas Ionides. “Funds will be used for general corporate and
operational purposes,” he said. “We went with Singapore
dollars given our functional currency is Singapore dollars,
which makes it more cost effective for us to tap that market.”

U.S. dollar borrowing costs for Singaporean companies
average 4.04 percent, down from 4.31 percent at the start of the
quarter, JPMorgan Chase & Co. indexes show.

Manufacturing output in Singapore increased 12.8 percent in
February from a year ago, the fastest pace of expansion since
December 2011, Economic Development Board data show. Exports are
expected to rise 1 to 3 percent in 2014, the trade promotion
agency said last month, amid raised projections for global
growth by the International Monetary Fund.

Ringing Tills

Shoppers’ willingness to spend will also increase as price
rises cool, according to Bloomberg Industries analysts. Food
inflation fell to a seven-month low 2.3 percent in February from
3 percent in January. The slowdown, which ended a four-month run
of accelerating price increases, may boost sales of premium-priced branded food and beverages, they said in a March 25 note.

Aspial Corp., which runs a chain of jewelry stores, sold
S$80 million of three-year 4.5 percent notes in January, just
six months after its previous bond transaction. Mohamed Mustafa
& Samsudin, which runs the Mustafa store, raised S$75 million
selling similar-maturity notes at 4.75 percent, the first time
its tapped debt capital markets.

Investors in Singapore bought about 90 percent of Singapore
Airlines’ bonds, according to a person familiar with the matter
who asked not to be identified because the details are private.

The carrier plans to start a joint-venture airline with the
Tata Group in the second half of this year to service a surge in
demand for air travel in India, the world’s second-most populous
nation.

Banking Hub

It posted a 65 percent decline in profit to S$50.1 million
for the three months ended Dec. 31 as losses from associated
companies such as budget airline Tiger Airways Holdings Ltd.
crimped earnings. Passenger numbers for the period increased 2.1
percent to 4.78 million and the carrier packed 79.4 percent of
available seats.

As well as establishing itself as a transport hub for
flights to Europe and beyond, Singapore has also become home to
a swathe of private banks and hedge funds. It overtook Japan as
the biggest foreign-exchange center last year and Indonesia’s PT
Bank Mandiri opened its first branch in the city this week.

Expansion of the island’s private banking industry, and the
presence of regional offices of global companies, has drawn more
top talent, with senior executives in Singapore now earning more
than in Hong Kong, human resources consultancy firm Towers
Watson & Co. said in a February report.

Foreign Banks

The nation’s bond market is also seeing an increasing
number of foreign banks jostle for arranger roles. Melbourne-based Australia & New Zealand Banking Group Ltd. has helped to
arrange 9.8 percent of sales this quarter, ranking no. 3 for the
first time since the final three months of 2011, Bloomberg-compiled data show. London’s Standard Chartered Plc ranks
second, helping to arrange 19.3 percent of transactions, behind
DBS at 29.4 percent.

ANZ, Australia’s third-biggest lender, said strong banking
relationships with key Singaporean clients, developed over the
past few years, are “bearing fruit,” according to Vishnu
Shahaney, the bank’s Singapore chief executive.

Singapore “is business-friendly and pragmatic in its
approach,” Shahaney said. “It embodies safety and has an
incredible talent pool of finance professionals. Decision makers
are approachable and open, and are able to react to world market
developments very effectively.”